What is Regulation A+?

Regulation A+ is a securities exemption that allows both privately-owned and SEC reporting companies in the US and Canada to raise capital from investors with limited marketing restrictions. Some of the core features of a Reg A+ offering include:

• Raise up to $20,000,000 in a Tier 1-Offering and up to $75,000,000 in a Tier-2 Offering, per 12-month period
• Immediate liquidity opportunity for investors as securities sold under Reg A+ are unrestricted securities
• Accept investments from both accredited investors and non-accredited investors
• Utilize social media and other digital marketing strategies to promote your campaign
• Openly pitch your fundraising effort at events
• Simplified investor on boarding with the help of technology service providers, brokers-dealers, and fundraising platforms

Eligibility

The Reg A+ exemption is limited to issuers organized and with a principal place of business in the United States or Canada. Issuers subject to “bad actor” disqualification as defined under Regulation D pursuant to the Dodd-Frank Act in 2013 are not eligible to rely on the exemption. As of January 31, 2019, in addition to private companies meeting the criteria enumerated above, companies subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act may conduct Reg A+ offerings. There are further limitations on eligibility that should be examined with the support of counsel at the time of your initial consultation.

“Eligible securities” under the final rules for Reg A+ are limited to equity securities, debt securities, and debt securities convertible or exchangeable into equity interests, including any guarantees of such securities. Asset-backed securities are expressly excluded.

Tier 2 Offerings

For Tier 2 offerings, there is an offering limit of up to $75M within the prior 12 months in equity, debt or convertible securities, but no more than $22.5M by selling security holders.

Tier 1 Offerings

For Tier 1 offerings, there is an offering limit of up to $20M within the prior 12 months, but no more than $6M by selling security holders.

Testing the Waters

Issuers may generally solicit interest in a potential offering, both before and/or after the filing of the Form 1-A offering statement. Pursuant to the 2020 rule changes, issuers are permitted to put out “generic solicitation of interest materials” before identifying a specific exemption under which the securities are to be offered. Issuers are able to communicate either orally or in writing with potential investors to gauge public interest before commencing the offering. Sales are permitted after the Form 1-A is declared qualified by a “notice of qualification” by the Division of Corporation Finance within the SEC.

State Law Preemption

Tier 2 offerings are generally exempt from state blue sky registration and qualification requirements. Still, despite federal preemption, the securities sold in Tier 2 offerings are, in most states, subject to state dealer registration, filing of all offering materials, fees and issuer consent to service of process at the state level.

Tier 1 offerings continue to be subject to blue sky requirements, but should review the NASAA multi-state coordinated review program that may be able to help issuers expeditiously meet state standards of review.

The Limitations of Regulation A+

While equity crowdfunding is being adopted as a viable method of raising capital in the US, this exemption does have its limitations and is not well-suited for all companies.

Some of the most practical considerations include:

• Company eligibility — the exemption is available only to US and Canadian companies
• Registration in Tier 1 offerings — state securities law compliance for Tier 1 offerings can be time consuming and expensive
• Timeline — must be inclusive of and account for the hard-to-nail-down SEC review and qualification period
• Number of investors limits under the Exchange Act
• Non-accredited investor investment limits

Guidance at Every Stage of Your Reg A+ Offering

We leverage our understanding of the JOBS Act, experience with Regulation A+ and relationships in the industry to quickly and effectively file your offering with the SEC for review and qualification. While there are risks associated with raising capital under any exemption, our firm understands and has experience handling these concerns. Our services include:

• Guidance on offering structure, including security type and terms. We provide insights to our clients on appropriate structures and the ramifications of choosing different security structures for your financing – whether you are offering debt, equity, or a revenue participation to investors
• Advice relating to testing the waters and general marketing activities
• Compliance with Regulation A+ during your pre-qualification period, in your offering materials, during your campaign, and after your campaign ends
• Drafting and filing your compliant Form 1-A with the SEC, working with the regulators while seeking qualification of your offering
• Providing post-campaign support, including advising our clients on future financing rounds, best practices in investor relations management, secondary trading issues and other matters

Our firm has strong connections with industry professionals who can provide services during your raise, including:

• Accountants – We can connect you with eligible and experienced Reg A+ CPAs
• Marketing Support – we will facilitate introductions to reputable marketers with strong Reg A+ track records
• Transfer Agent Services

Along with supporting you while choosing the best service providers to achieve your goals, we'll also work with you on the following:

• Choosing an Offering Venue – determining whether to list the investment opportunity on your own site, on a broker-dealers site or on a crowdfunding platform’s site
• Cap Table Management
• OTC & Exchange Listings